REFILE-Strong miners push European shares to higher close

(Clarifies first bullet to show rise is 0.5 percent)

* FTSEurofirst 300 ends 0.5 pct higher after choppy session

* Basic resources shares among top gainers on strong metals

* Equities attractive in terms of valuations, other assets

By Atul Prakash

LONDON, March 23 (Reuters) – European shares ended higher on
Wednesday, helped by strong mining stocks, and analysts said
markets should rise even higher once visibility on issues such
as the Libyan conflict and Japanese nuclear situation improves.

Market experts said equities were attractive in terms of
valuations and as compared to other asset classes, while
chartists saw a key index bouncing back in the second quarter.

The FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) index of top European shares
ended 0.5 percent higher at 1,112.36 points after falling to
1,102.35. Volumes were 95 percent of its 90-day daily average.

Miners were the best performing sector, tracking gains in
key base metals that rose on expectations of a supply deficit
this year. The STOXX Europe 600 Basic Materials index (.SXPP: Quote, Profile, Research)
rose 2 percent, while Xstrata (XTA.L: Quote, Profile, Research) was 3.5 percent higher.

“There is an unusual amount of uncertainty and as long as
that prevails we have to live with fairly high volatility,” said
Klaus Wiener, chief economist at Generali Investments, which
manages about $465 billion.

“The macro environment will remain sufficiently supportive
for the markets to continue to drift higher, once visibility on
issues such as Libya, Japan and the [euro zone] sovereign credit
crisis improves. In relative terms, equity markets are a lot
more attractive than government bonds.”

Equity research firm AlphaValue said debt-financed merger
and acquisition actions will effectively inject new flows into
the market. It also said its confidence in a healthy earnings
growth of about 15 percent for equities in 2011 had dropped over
the last three weeks, but noted the market was still cheaper.

According to Thomson Reuters Datastream, Europe’s STOXX 600
index (.STOXX: Quote, Profile, Research) trades at 10.2 times one-year forecast earnings,
below a 10-year average of 13.6, and against a ratio of 12.5 for
the U.S. S&P 500 (.SPX: Quote, Profile, Research).

FINANCIALS UNDERPERFORM

Banking shares underperformed the wider market on renewed
concerns of a euro zone debt crisis. The European banking index
(.SX7P: Quote, Profile, Research) fell 0.04 percent, while Portugal’s PSI 20 (.PSI20: Quote, Profile, Research)
dropped 1 percent. Banco Espirito Santo (BES.LS: Quote, Profile, Research) and Banco BPI
(BBPI.LS: Quote, Profile, Research) fell 0.5 percent and 3.5 percent respectively.

According to a study by Standard & Poor’s, a severe economic
recession could force European banks to raise up to 250 billion
euros ($355 billion) and cause government borrowing requirements
to rise by a fifth. [ID:nLDE72L2DV]

European Union leaders are set to delay a decision on how to
strengthen their multi-billion euro rescue fund beyond a summit
this week. The market fears a political crisis in Portugal could
force the country to seek help, but Wiener said a possible
bailout was already priced in. [ID:nLDE72M1E6] [ID:nLDE72M00L]

“The government may fall, but in the end it’s very likely
that Portugal will ask for help anyway. Looking at what Portugal
has to pay in the primary and secondary markets, the economic
incentive to ask for help is huge.”

Charts predicted more gains for the Euro STOXX 50
(.STOXX50E: Quote, Profile, Research) index, which rose 0.4 percent to 2,866.23 points.

“We are advising our clients to buy on the weakness. We
expect more strength in the second quarter and a rally into the
region of 2,950 and 3,000 during late April and the first half
of May,” said Michael Riesner, technical analyst at UBS
Investment Bank. He saw support at last week’s low of 2,717.

London’s leading shares showed little reaction to the UK
budget as investors weighed up a cut in corporation tax against
a downgrade of growth forecast. [ID:nLDE72M01C]

“We may see this as a budget that attempts to consolidate
and yet one that justifies being seen as a credible vessel that
attempts to create economic stability,” said Howard Wheeldon,
senior strategist at BGC Partners.
(Editing by Jon Loades-Carter)

REFILE-Strong miners push European shares to higher close